<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-19971
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UNIVERSAL SEISMIC ASSOCIATES, INC.
(Exact name of Registrant in its Charter)
<TABLE>
<S> <C>
Delaware 76-0256086
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
16420 Park Ten Place, Suite 300
Houston, Texas 77084-5051
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(281) 578-8081
(Issuer's Telephone Number)
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Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 5,234,109 shares of Common
Stock, $.0001 par value, were outstanding as of November 10, 1997.
<PAGE> 2
PART I
FINANCIAL INFORMATION
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE MONTH ENDED AND YEAR TO DATE SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
<S> <C> <C>
Operating revenues:
Data acquisition $ 9,463,888 $ 6,993,023
Data processing 302,336 414,581
Oil and gas 152,294 -
----------- -----------
Total operating revenues 9,918,518 7,407,604
Operating expenses:
Cost of data acquisition 8,554,567 6,847,781
Cost of data processing 200,159 192,359
Oil and gas operating expenses 41,813 -
Selling, general and administrative expenses 639,456 553,046
Depreciation and amortization 816,294 761,005
----------- -----------
Total operating expenses 10,252,289 8,354,191
Gain on sale of asset - 559,461
----------- ------------
Total operating loss (333,771) (387,126)
Interest expense (436,777) (366,252)
Other income, net 9,025 2,304
----------- ------------
Net loss $ (761,523) $ (751,074)
=========== ============
Loss per share $ (0.15) $ (0.16)
=========== ============
Weighted average common shares and common share 5,234,109 4,788,944
=========== =============
equivalents outstanding
</TABLE>
See accompanying notes to financial statements
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<PAGE> 3
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September June 30,
ASSETS 1997 1996
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 698,808 $ 1,859,677
Trade accounts receivable, net 7,594,236 6,007,340
Costs in excess of billings and estimated earnings on uncompleted contracts 50,587 274,602
Prepaid expenses and other current assets 430,620 498,982
------------ ------------
Total current assets 8,774,251 8,640,601
Property and equipment
Seismic property and equipment, net 15,218,734 15,896,535
Oil and gas properties, full cost method 6,723,280 6,909,316
------------ ------------
Total property and equipment, net 21,942,014 22,805,851
Other assets:
Goodwill, net 588,983 601,694
Other 192,474 228,088
------------ ------------
Total assets $ 31,497,722 $32,276,234
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations $ 2,191,960 $ 2,198,856
Billings and estimated earnings in excess of costs on uncompleted contracts - 470,690
Accounts payable 5,343,943 5,912,647
Other current liabilities 2,336,530 2,798,278
------------ ------------
Total current liabilities 9,872,433 11,380,471
Long-term obligations, net of current maturities 17,107,304 15,616,255
------------ ------------
Total liabilities 26,979,737 26,996,726
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value; 20,000,000 shares authorized; 4,283,147
shares issued at June 30, 1996 and 5,239,109 shares at September 30, 1997
524 524
Additional paid in capital 17,105,443 17,105,443
Accumulated deficit (12,567,982) (11,806,459)
Less: Treasury stock, at cost; 5,000 shares (20,000) (20,000)
------------ ------------
Total stockholders' equity 4,517,985 5,279,508
------------- ------------
Total liabilities and stockholders' equity $ 31,497,722 $ 32,276,234
============= ============
See accompanying notes to financial statements
</TABLE>
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<PAGE> 4
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended September 30,
---------------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (761,523) $ (751,074)
adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 866,227 790,190
(Gain) Loss on disposal of assets 21,547 (559,461)
Changes in operating assets and liabilities:
Accounts receivable, net (1,586,896) 2,455,833
Costs and estimated earnings in excess of billings on uncompleted
contracts 224,015 (354,656)
Prepaid expenses and other current assets 68,362 (153,044)
Accounts payable (568,704) 1,829,455
Billings in excess of costs and estimated earnings on uncompleted
contracts (470,690) (1,106,725)
Other current liabilities (461,748) (113,070)
----------- -------------
Net cash provided (used) by operating activities (2,669,410) 2,037,448
----------- -------------
Cash flows from investing activities:
Capital expenditures 31,712 (2,037,448)
Proceeds from sale of assets - 680,625
Proceeds from receivable from stockholder - 28,440
----------- ------------
Net cash provided (used) in investing activities 31,712 (1,608,443)
----------- ------------
Cash flows from financing activities:
Proceeds from debt and obligations 8,170,565 8,514,771
Payments on debt and obligations (6,693,736) (9,089,946)
Proceeds from issuance of common stock, net - 38,750
----------- -------------
Net cash provided (used) by financing activities 1,476,829 (536,425)
----------- ----------
Net decrease in cash and cash equivalents (1,160,869) (107,420)
Cash and cash equivalents at beginning of period 1,859,677 982,431
----------- -------
Cash and cash equivalents at end of period $ 698,808 $ 875,011
=========== ============
See accompanying notes to financial statements
</TABLE>
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<PAGE> 5
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements of Universal Seismic
Associates, Inc. and subsidiaries ("the Company") have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
Annual Report on form 10-KSB filed with the Securities and Exchange
Commission for the year ended June 30, 1997. In the opinion of the
Company, all adjustments, consisting only of normal recurring
adjustment, necessary to present fairly the financial position as of
September 30, 1997, the results of operations for the three months
ended September 30, 1996, and 1997, the statements of cash flows for
the three months then ended have been included.
2. On August 6, 1997 the Company borrowed $2,000,000 from Resource
Management Investment Company ("RIMCO"), under a 12% Senior Secured
General Obligation Note, secured by the Company's seismic equipment
with interest payable monthly and principal due December 1, 1999. The
proceeds were used to fund the shareholder lawsuit settlement.
On October 31, 1997 the Company entered into a $3,874,383 financing
arrangement with RIMCO, with proceeds to be utilized for agreed upon
working capital purposes. The agreement is in the form of a series of
12% Senior Secured General Obligation Notes of which $2,144,000 were
sold by Universal and $1,730,383 were sold by the Company's energy
subsidiary, UNEXCO. The arrangements will function as revolving lines
of credit for the respective entities with payments of interest only
until maturity on December 1, 1999.
RIMCO has waived defaults under the covenants in its various financing
agreements until July 1, 1998.
3. The Company has a $5,000,000 revolving line of credit with a financial
institution for the financing of its trade receivables. The
Agreement provides the Company must maintain a minimum net worth of
$3,000,000 and annual earnings before interest, taxes, depreciation
and amortization of at least $500,000, plus certain other covenants.
The Company is not in compliance with certain provisions of the
agreement and has been unsuccessful in obtaining a waiver; however,
the Company still receives advances under the arrangement.
4. The foregoing interim results are not necessarily indicative of the
results of operations for the full fiscal year ending June 30, 1998.
5 of 8
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30, 1996
OPERATING REVENUE AND COSTS
Operating Revenues. Operating revenues totaling $9,918,518, for the
three month period ended September 30, 1997 represent an increase of
approximately 34% over revenues of $7,407,604 for the same three month period
ended September 30, 1996. Data acquisition revenues for the three month period
in 1997, increased by approximately 35%, to $9,463,888 due to the Company
engaging in larger projects. Data processing revenues for the three months
ended September 30, 1997, totaling $302,336 represent a decrease of
approximately 27% below revenues of $414,581 for the three month period ending
September 30, 1996. The Company was unable to maintain previous year levels of
data processing backlog. Oil and gas revenues for the three month period ended
September 30, 1997 were $152,294 versus none for the comparable prior year
period. The Company does expect oil and gas revenues to increase in fiscal
1998, although such increase is likely to be limited because the Company
currently lacks sufficient financing resources to fully develop its properties.
Operating Expenses. Operating expenses of $10,252,289 for the three
month period ended September 30, 1997, represent an increase of approximately
23% over operating expenses of $8,354,191 in 1996. Direct costs of seismic
acquisition increased by approximately 25%, from $6,847,781 for the three
months period ending September 30, 1996 to $8,554,567 for the same period
ending September 30, 1997. This increase was directly related to the larger
projects the Company has engaged in, which had weather delays and terrain
problems. Direct cost of data processing increased approximately 4% for the
three month period, from $192,359 in 1996, to $200,159 in 1997. Oil and gas
operating expenses for the three month period ended September 30, 1997 were
$41,813 versus none for the comparable prior year period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately 16%, for the comparable three
month periods, from $553,046 in 1996 to $639,456 in 1997. This increase is
attributable to increased audit and accounting costs.
Depreciation and amortization. Depreciation and amortization
increased by approximately 7% from $761,005 in 1996 to $816,294 in 1997 due to
depreciation, depletion and amortization expense, related to the Company's oil
and gas properties, incurred in the current year period.
Interest Expense. Interest expense increased approximately 19% from
$366,252 for the three months ended September 30, 1996, to $436,777 for the
same period ended September 30, 1997. The increased interest resulted
primarily from additional working capital financing.
Net Loss. The Company reported a net loss of $761,523 for the period
ended September 30, 1997 as compared to a net loss of $751,074 for the same
prior year period. The current period net loss was primarily the result of
lower gross margins from Data Acquisition activities that combined with
indirect overhead, depreciation and interest expenses lead to operating losses.
Although the Company is attempting to reduce its operating losses by increasing
Data Acquisition marketing efforts, improving Company and crew management and
staffing and otherwise attempting to increase the efficiency of its seismic
crews, it is anticipated that operations will continue to be conducted at a
loss in the near term.
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<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended September 30, 1997, cash and cash
equivalents decreased by $1,160,869 to $698,808. Cash provided by investing
activities of $31,712 includes investments in oil and gas properties of
$876,000, $27,800 for data processing equipment and upgrades, with the balance
of $76,900 used for miscellaneous data acquisition equipment, less $1,012,500
received from the sale of an interest in one of the Company's major oil and gas
properties.
In August 1997 the Company borrowed an additional $2,000,000 from
RIMCO. The proceeds were utilized to fund the shareholder litigation
settlement and legal and accounting fees incurred as of a result of such
litigation. The Company expects to recover a substantial portion of its costs
of the settlement and expenses associated with the lawsuit from its directors'
and officers' liability insurance carrier.
The Company's accounts payable balance decreased by $568,704 during
the current three month period. This can be attributed to the Company's
continuing efforts to reduce payables. Accounts receivable increased by
$1,586,896 during the three month period, primarily as a result of the
increased Data Acquisition activity. The company had approximately $1,579,000
of receivables over 90 days old.
At September 30, 1997 the Company had cash balances of $698,808. If
losses from operations continue, the Company does not believe this cash, along
with anticipated cash flow from its seismic and exploration and production
operations and funds available under its credit facilities, will be adequate
for its overall working capital requirements.
On October 31, 1997 the Company entered into a $3,874,383 financing
arrangement with RIMCO, with proceeds to be utilized for agreed upon working
capital purposes. The agreement is in the form of a series of 12% Senior
Secured General Obligation Notes of which $2,144,000 were sold by Universal and
$1,730,383 were sold by the Company's energy subsidiary, UNEXCO. The
arrangements will function as revolving lines of credit for the respective
entities with payments of interest only until maturity on December 1, 1999.
SUBSEQUENT EVENTS
None.
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<PAGE> 8
PART 2
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
RIMCO has waived the Company's defaults under the covenants in the
various financing agreements until July 1, 1998. The Company, also, was not in
compliance with certain provisions of the $5,000,000 revolving line of credit
with a financial institution for the financing of its trade receivables and has
been unsuccessful in obtaining a waiver; however, the Company still receives
advances under the arrangement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On November 11, 1997 the Company announced that Joe T. Rye was
appointed President and Chief Executive Officer on an interim basis succeeding
Michael J. Pawelek, who will serve as Executive Vice President of the Company
and President of the Company's oil and gas subsidiary, UNEXCO, Inc. Also
appointed by the Board was Stephen H. Wood as Vice President - Seismic
Operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
UNIVERSAL SEISMIC ASSOCIATES, INC.
JOE T. RYE
Date: November 14, 1997 PRESIDENT / CHIEF EXECUTIVE OFFICER
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<PAGE> 9
INDEX TO EXHIBITS
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 698,808
<SECURITIES> 0
<RECEIVABLES> 8,315,933
<ALLOWANCES> (721,697)
<INVENTORY> 0
<CURRENT-ASSETS> 8,774,251
<PP&E> 32,444,314
<DEPRECIATION> (10,502,300)
<TOTAL-ASSETS> 31,497,722
<CURRENT-LIABILITIES> 9,872,433
<BONDS> 17,107,304
0
0
<COMMON> 524
<OTHER-SE> 4,517,461
<TOTAL-LIABILITY-AND-EQUITY> 31,497,722
<SALES> 0
<TOTAL-REVENUES> 9,918,518
<CGS> 0
<TOTAL-COSTS> 8,796,539
<OTHER-EXPENSES> 1,455,750
<LOSS-PROVISION> 666,697
<INTEREST-EXPENSE> 436,777
<INCOME-PRETAX> (761,523)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (761,523)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
